Allen v. Rundle

Loomis, J. The claim which the plaintiffs in this action seek to recover of the defendants was originally against The Bartram & Fanton Sewing Machine Company, a joint stock corporation, for a loan of $8,000, evidenced by the promissory notes of the corporation. After paying $1,000 on the notes a new corporation was formed, called “ The Bartram & Fanton Manufacturing Company,” with a larger capital, which was to assume the liabilities and prosecute the business of the old company. The subscriptions to the stock of the new company were not to be binding unless they aggregated a certain amount in a specified time. The time had nearly expired-, and $30,000 remained to be subscribed in order to fill the condition. Benedict, who had already subscribed for $5,000 of the stock, was urged to subscribe for the remaining $30,000, and to induce him so to do the seven defendants, together with fourteen other persons, all subscribers to the stock, promised to execute, and did so execute and deliver to him, a bond of indemnity, as set forth in the finding, which Benedict accepted, and subscribed for the amount remaining. — 535 — After this the plaintiffs demanded of the new company payment of the notes held by them against the old company, and were about to enforce the collection when the defendants, being interested as stockholders in the new company, arranged the matter between the plaintiffs and the corporation by a new note dated November 25th, 1871, for the amount due the plaintiffs, signed by said Benedict, payable to the plaintiffs on demand, with interest semi-annually and the taxes, which note was guaranteed by the defendants as follows in writing on the back of the same: — “For value received we jointly and severally guarantee the within note good and collectible until paid.” The finding of facts contains a detailed statement of the negotiations which resulted in the above arrangement, and of the verbal promises at the same time made by the defendants, both to Benedict and to the plaintiffs, that they would pay the note. It is very clear that the plaintiffs might have had, and perhaps may still have, a good claim against the defendants on their guaranty. But for purposes of the present suit this claim is abandoned, and no recovery is sought except under the common counts, predicated solely on some primary and. original liability on the part of the defendants. In abandoning the sure ground of the written guaranty, it seems to us that the plaintiffs are surrounded with legal difficulties that are insurmountable. 1. If the relations of the parties and the obligations resting on the defendants are to be determined by the note and guaranty, it must be conceded that no recovery can be had under the common counts. The note and guaranty as against the defendants are not competent evidence. The guaranty is a special contract that the note will prove good and collectible until paid, and in order to recover on it there must be a special count alleging the contract and a breach of it, which must be proved by relevant evidence. 2 Saunders’ Pleading and Evidence, 545; Mines v. Sculthorpe, 2 Camp., 215; Carney v. O’Neil, 27 Mich., 495. The ground for the admissibility of promissory notes as — 536 — evidence under the common counts is, that a presumption arises from the promise to pay money, that money has been received. Brooks v. Holland, 21 Conn., 388. But surely no such presumption, and indeed no presumption at all, as against the promisor, arises from a mere warranty that a note is good and collectible. 2. But the plaintiffs say that with the aid of parol evidence they have shown that the defendants whose names are written on the back of the note, ostensibly as guarantors, were not in fact such merely, but were really makers of the note. But the difficulty here is, that .such a fact cannot be shown by parol without utterly abrogating one of the most thoroughly established and important rules of evidence — that “ no parol evidence is admissible to contradict, vary, or explain a written contract, or to show it to be different from what it purports to be on the face of it,” except in case of ambiguity. 1 Swift Dig., 187; 1 Greenl. Ev., § 275; Dale v. Gear, 38 Conn., 15; Worcester County Institution for Savings v. Davis, 13 Gray, 531. There is an anomalous class of cases where a third person, neither payee nor maker, puts his name on the back of a note before its indorsement by the payee, where by parol evidence such person may be held liable either as original promisor, guarantor or indorser, according to the nature of the transaction and the understanding of the parties. Bryant v. Eastman, 7 Cush., 113; Benthal v. Judkins, 13 Met., 267; Good v. Martin, decided by the Supreme Court of the United States, and reported in the American Law Register for February, 1878, p. 111. But in all these cases the indorsement is in blank, and there is no written contract, and none is definitely implied by law from the indorsement. In cases of blank indorsements, where the contract is implied by law, it has the same effect as if written, and parol evidence is not admissible to contradict or vary it, as in the cases of Dale v. Gear, supra, Bigelow v. Colton and Lake v. Stetson, 13 Gray, 310. The Supreme Court of Massachusetts, — 537 — in the recent case of Allen v. Brown, 124 Mass., 77, held that parol evidence was not admissible to show that indorsers who indorsed a promissory note before delivery to the payee, were accommodation indorsers or sureties only. See other cases to the same effect cited in the opinion by Soule, J. 3. Again, the plaintiffs, by wholly ignoring the existence of the note and written guaranty, except as forming an item in the history of the case, propose to hold the defendants on their mere verbal promise. . Allowing the plaintiffs to have their way in this regard, the statute of frauds would be troublesome, to say the least, and the want of consideration proved would be an insuperable objection. But the true and sufficient objection to this claim is, that by the rules of law the written contract, being clearly expressed and deliberately made, cannot be ignored, for “it is conclusively presumed that the whole engagement of the parties, and the extent and manner of their undertaking, was reduced to writing. After this, to permit oral testimony, or prior, or contemporaneous, or subsequent conversation, in order to learn what was intended or contradict or vary what is written, would be dangerous and unjust in the extreme.” Glendale Manf. Co. v. Protection Ins. Co., 21 Conn., 37; 1 Greenl. Ev., § 275. 4. Some of the legal principles before mentioned also stand in the plaintiffs’ way when they would invoke the aid of the doctrine of novation. In the place of the written evidence of the defendants* undertaking, they must substitute by parol evidence another contract, whereby the defendants directly assumed upon themselves the payment of the plaintiffs’ debt against the corporation. And besides this, even the parol evidence fails to make out some of the essential elements of novation. Not only must it appear that the corporation owed the plaintiffs, but that the defendants owed the corporation, and that by the new arrangement between the parties the two original debts were absolutely discharged. It is not even found that the defendants owed any debt to the corporation, and of course no such debt was discharged. — 538 — It is not found that the plaintiffs’ debt against the corporation was discharged. It is found that the original notes were given up, which is evidence tending to show such a fact, but is by no means equivalent to finding a discharge. 5. Finally, we mention as one fatal objection to all modes of charging the defendants primarily with this debt, under the common counts, the want of consideration moving from the plaintiffs to the defendants. The court expressly finds “that there was no evidence of such consideration except as hereinafter appears.” In the detailed statement of facts which follows, no such consideration is disclosed. As we have already seen, not a dollar of money or property ever passed (or was ever promised) from the plaintiffs to the defendants. All went to the corporation alone. It is true that the defendants were stockholders; but as such they had no legal identity with the company, but were in contemplation of law as much strangers and third persons as if they had never heard of such a corporation. Undoubtedly they took a deep interest in the success of the corporation, and what they verbally said and promised is to be construed with reference to this fact, and also with especial reference to the principal fact, that the Benedict note with the written guaranty of the defendants was accepted by the plaintiffs, and must have been regarded by all parties as embodying all the essential parts of the transaction. A consideration is attempted to be shown in the fact that the amount of the old notes, given; up by the plaintiffs, when the guaranteed note of Benedict was delivered to them, was afterwards credited as so much cash on Benedict’s subscription, which it is said had the effect to reduce by so much the liability of the defendants on account of that subscription. There are several answers to this claim. In the first place, it must be borne in mind that the liability referred to was a mere contingent liability, and was entered into not by the defendants merely, but by fourteen other persons, in no way concerned in this transaction, and that the nature of that liability is not to be determined by parol evidence, but by the written condition of the bond given to — 539 — Benedict. By the terms of tlie condition of this bond it will be seen that there was no obligation on any of the signers to pay Benedict any thing until ho had first been compelled to pay upon the call of the directors, and then only upon the express proviso that Benedict should transfer to the person or persons so re-paying him a proportionate amount of the stock standing in his name. These provisos were not complied with, and there was no certainty that any liability would ever accrue under that bond, for Benedict might choose to keep the stock himself, and pay for it without looking to the obligors for reimbursement. But another conclusive answer is, that it nowhere appears that at the time of the execution and delivery of the Benedict note to the plaintiffs, there was any understanding or agreement whatever that the amount of the note should be credited on Benedict’s subscription; and the defendants are in no way responsible for that application of the note. The finding is explicit on this point; the language is as follows: — “ Thereupon Seeley (who was financial agent and manager of said new company) without authority from Benedict put the amount of the note in suit to the credit of Benedict on account of the subscription made as aforesaid by him for said $30,000 of the stock of said new company.” Seeley thus, of himself, treated the note in suit as so much cash paid by Benedict towards his $80,000 subscription to the stock of the new company. For the foregoing reasons we advise judgment for the defendants. In this opinion the other judges concurred.